Senate Bill 584 would position Missouri as a leading location for Data Centers

Missouri will have a strong tool for luring one of the fastest growing industries to our state if Gov. Nixon signs Senate Bill 584 into law. On the final day of the 2014 Legislative Session, lawmakers gave final approval to an omnibus bill that contained a provision to exempt from sales tax resources or equipment used or consumed in the production or facilitation of a data center, including utilities and electricity.

That provision will give Missouri a significant boost above other states wooing data centers and server farms. A data center is a facility used to house computer systems and associated components, such as telecommunications and storage systems.

“Companies are investing billions of dollars right now to build and establish data centers as the demand for storage of electronic data continues to grow exponentially,” said Dan Mehan, Missouri Chamber president and CEO.

Missouri is an ideal location for data centers because it is situated in a geographically low-risk location from natural disasters. Missouri boasts more than 15 million square feet of subterranean sites carved out of former limestone quarries, providing climate control, enhanced security and reduced vulnerability. The states central location and abundant, cost-effective power also makes Missouri a prime location for these facilities.

“Missouri has taken a back seat, however, to other states that have implemented aggressive tax policy to recruit data centers to build there,” Mehan said. “This legislation could be a game changer for this business sector.”

The legislation is sponsored by Sen. Bob Dixon, a Republican from Springfield.

For more information on tax issues, contact Tracy King, Missouri Chamber vice president of governmental affairs, at tking@mochamber.com, or by phone at 573-634-3511.

Advertisements

Major economic development bills move through the House this week

This week the Missouri House gave final approval to legislation that would create several new business incentives that have been priorities for the Missouri Chamber.

The bill, House Bill 1501, sponsored by Rep. Anne Zerr (R-St. Charles) was third read and passed on Thursday and creates tax breaks for computer data centers, freight forwarders and angel investors in new high-tech businesses.

One of the key provisions of the bill are tax incentives to encourage the establishment of data centers in Missouri were also included in HB 1501.  A data center is a facility used to house computer systems and associated components, such as telecommunications and storage systems. We have become a technology and data driven society and the need of data centers are a result of this exponential growth.

Missouri is losing out to Iowa, Nebraska, Kansas, Oklahoma and other Midwestern states. Neighboring states offer tax incentives including sales tax exemptions and personal property tax exemptions and abatement. Under current incentive conditions, a 100,000 square foot data center costs $15 million more to locate in Missouri than in competing states.

Another provision of the bill would provide incentives for businesses that forward freight internationally through Missouri’s international airports. Under this legislation, qualified freight forwarders would receive tax credits against income tax, based on the volume of outbound air cargo.

Missouri Chamber of Commerce and Industry President, Dan Mehan, says the legislation could be transformational not just for Missouri but for the entire region.  Mehan also serves as Chairman of the Midwest Hub Commission.

“This legislation will help create a portal in Missouri for exporting and importing international goods,” Mehan said.  “What we have learned is that if you open up St. Louis to markets in Europe, Asia and South America you will start attracting other activity from other areas around the globe.”

The Angel Tax Credits program is another priority of the Missouri Chamber. Angel Tax Credits reward qualified individual investors for investing in early stage, wealth-creating businesses.  The program fills a need that currently exists for innovation and technology startups by providing funding when other financial institutions cannot.

The savings in HB 1501 come from placing caps on the Low-Income Housing tax credits ranging from $130 million in 2015 to $110 million in 2019.  Historic Preservation credits will be capped at $90 million for projects that are more than $275,000.

Tracy King, vice president of governmental affairs for the Missouri Chamber has advocated on behalf of this legislation and is pleased at its passage out of the House.

“For more than five years now we have not been able to move forward on economic development legislation due to the disagreement on tax credit reform. We are hopeful that this is the last year Missouri stands still on new programs while other states pass us by.”

The measure now heads to the Senate.

Chamber works to bring more data centers to Missouri

In an effort to bring more technological industries to Missouri, which provides a mostly ideal location for such centers, the House Economic Development committee also held a hearing on HB 1444, sponsored by Rep. Kevin Austin, R-Springfield, which would change the laws regarding data storage centers and server farm facilities.

States surrounding Missouri, such as Iowa, Nebraska and Kansas, are currently home to data storage centers, which generate millions of dollars of revenue for those states. Missouri does not currently offer any tax incentive for data storage centers to relocate to Missouri, making it more expensive for a data center to be built within the Show-me state. It currently costs around $1,500 per square foot to construct a data center compared to $50 per square foot for normal construction, making it a very expensive venture for data storage companies.

“Data centers are going to continue to grow as an industry. Technology is increasing and data centers are a huge private investment,” Tracy King, vice president of governmental affairs for the Missouri Chamber, said. “We have everything that we need here in Missouri to attract data centers except our tax structure.

“Data centers are a way to create jobs and secure additional state revenues in Missouri,” said King during testimony. “Decisions are being made where to place data centers right now and as a state we need to secure our share in this opportunity.”

Data centers, King explained, provide the “infrastructure” that allows the Internet to operate. Data centers are basically the “warehouse” for processing data. Data centers are crucial component of business today and are crucial for hospitals, universities, financial institutions, and utilities.

Missouri is an ideal location for data centers because it is situated in a geographically low-risk location from natural disasters. Missouri boasts more than 15 million square feet of subterranean sites carved out of former limestone quarries, providing climate control, enhanced security and reduced vulnerability.

“The data center industry is a $100 billion industry worldwide, growing at a rate of 8 percent annually,” King said. “It is a $30 billion industry in the US alone. If Missouri were able to capture even 5 percent of that investment, it would mean $1.5 billion of private investment for data center construction plus another $1.3 billion for tenant IT equipment.”

“Neighboring states offer tax incentives including sales tax exemptions and personal property tax exemptions and abatement,” King said. “Under current incentive conditions, a 100,000 square foot data center costs $15 million more to locate in Missouri than in competing states.”

Microsoft, Yahoo, and Google have already located large operations in Iowa, Nebraska and Oklahoma, King said.

The bill would create a tax rebate instead of a tax credit. In order to qualify, the data center would have to make a minimum capital investment of $37 million, create at least 30 jobs that pay at minimum 150% of the Missouri average wage, and it would all need to be done in 36 months in order to see the rebate.

For more information please contact Tracy King at tking@mochamber.com or by phone at 573-634-3511.